Financial Daily from THE HINDU group of publications
Friday, Feb 27, 2004
Mergers & Acquisitions
CDC Group allowed to buy ICI's nitrocellulose, trading biz
New Delhi , Feb. 26
THE UK-based CDC Group Plc has been permitted by the Foreign Investment Promotion Board to acquire ICI India's nitrocellulose and trading business.
According to sources, the acquisition will be made through two special purpose vehicles, one incorporated in Mauritius and the second incorporated in India.
The first special purpose vehicle incorporated by the CDC Group in Mauritius is Nitrex Mauritius Ltd (NML). NML will now acquire Fragrant & Flavour Chemicals India Private Ltd (FFCL) incorporated in India, which in turn will acquire ICI India's nitrocellulose and trading business portfolio for a consideration of Rs 75 crore as per the Business Transfer Agreement between the two companies.
It has also been decided that out of the total consideration of Rs 75 crore, Rs 12.75 crore will be payable in three equal annual instalments post acquisition.
According to sources, NML's acquisition of FFCL will be in two steps. First the company will subscribe to 85,70,000 fully paid up equity share of Rs 10 each of FFCL at par accounting for 99.88 per cent of the company's paid up equity capital.
In the second stage, NML will subscribe up to 5,87,70,000 fully paid up cumulative redeemable preference shares having a face value of Rs 10 each representing 100 per cent of the preference share capital of the company.
The two transactions together are valued at Rs 142.34 crore. After these two transactions are over, the actual acquisition of ICI India's business will take place.
These cumulative redeemable preference shares will bear an interest rate of 300 basis points above the prime-lending rate (PLR) of the State Bank of India (SBI).
Earlier, in the last week of December, the board of ICI India had approved the sale of its nitrocellulose and trading businesses to the CDC Group. The move is part of ICI India's efforts to exit its non-core businesses and concentrate on its core areas of specialty chemicals.
The company has already exited its pharmaceuticals business as well as fertilisers, explosives and polyester fibre businesses during the current fiscal and is also scouting for a buyer for its rubber products businesses.
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